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Group Coverage VS Individual Health Insurance Cost

Deciding whether to enroll in a group health insurance plan through your employer or to purchase your own individual health insurance plan can be a confusing decision to make. With significant differences in flexibility, benefit options, and costs, you need to know you’re making the right call for yourself and your family.

Many people assume that individual health insurance is more expensive than group health insurance, but is that true? How exactly do individual health insurance premiums compare to group health insurance premiums?

In this article, we’ll compare the cost of group health insurance and individual health insurance, as well as discuss another budget-friendly health insurance option to make your insurance even more affordable.

How much does group health insurance cost?

About 157 million people are covered by employer-based health insurance.

But how much do companies pay for employee health insurance?

For a look into trends and costs over the years, the Kaiser Family Foundation conducts an annual survey.

In their recent findings, in 2020, the average monthly premiums for group health insurance increased from previous years too:

  • $622 for individual coverage.
  • $1,778 for family coverage.
  • Since 2019, average employer-sponsored individual premiums increased 4%, and family premiums increased 4%. Moreover, the average premium for family coverage has increased 22% over the last five years and 55% over the last ten years.

How much does individual health insurance cost?

Due to the Affordable Care Act (ACA), premiums aren’t determined by gender or pre-existing health conditions.

However, the cost of individual health insurance varies depending on certain factors like:

  • Age
  • Income
  • Location
  • Dependents
  • Healthcare use: Chosen policy plan, either bronze, silver, or gold
  • According to eHealth’s recent study of ACA plans, in 2020, the national average monthly health insurance premium for an ACA plan was $456 for an individual plan and $1,152 for a family plan.

Individual health insurance vs. group health insurance cost

When you put them side by side, it’s easy to see that individual health insurance tends to be more affordable than employer-sponsored group health insurance, particularly for those with a personal health insurance plan.

  • Individual health insurance
  • Individual $456/month
  • Family $1,152/month
  • Group health insurance :
  • Individual $622/month
  • Family $1,778/month

Individual health insurance and health reimbursement arrangements (HRAs)

Group and individual health insurance plans are popular choices. Still, another option that can benefit employees and employers is called a health reimbursement arrangement (HRA) that is growing in popularity and works in conjunction with individual health insurance.

HRAs allow employers to reimburse employees, tax-free, for healthcare, including individual health insurance premiums and qualifying out-of-pocket medical expenses.

With an HRA, employers set their own budgets by offering an allowance amount for each employee. Employees win big on flexibility by being able to choose their own individual health insurance plan that’s tailored to their specific needs.

Let’s take a look at two of the most popular HRAs: the qualified small employer HRA (QSEHRA) and the individual coverage HRA (ICHRA).

With a QSEHRA, employees purchase their own health insurance and get reimbursed for medical expenses, health insurance premiums, and other qualified costs with tax-free dollars from their employer. To qualify, a company must have fewer than 50 full-time employees and can’t offer any employee a group health insurance policy.

Individual and group health insurance premiums and deductibles typically vary every year, but the QSEHRA has annual contribution limits that the IRS sets annually. This means that employers are limited in how much tax-free money they can offer their employees through the benefit.

Individual coverage HRA (ICHRA)

With an ICHRA, employers of any size can offer employees an HRA without maximum reimbursement limits. Like the QSEHRA, employees receive a monthly allowance to spend on their health insurance coverage and other qualified medical expenses. After submitting, reviewing, and verifying their expense, employers reimburse them up to their allowance amount.

Unlike the QSEHRA, employers have an added option of setting ICHRA eligibility guidelines and allowance amounts for their employees based on 11 different employee classes. Employees must also attest to having an individual health insurance policy at the beginning of each month before collecting reimbursements.

Conclusion

In the past, nearly every employee in the U.S. had a group health insurance policy they got through their employer, but a lot has changed in recent years. A growing trend for employees is to purchase their own individual health insurance that meets their unique healthcare needs. What’s more, employers are finding the addition of an HRA to be an even greater benefit to help cover the cost of their employees’ health insurance.

If you’re an employer deciding between group coverage and HRA for your employees, PeopleKeep is here to get you started! Schedule a call with one of our personalized benefits advisors, and we can help get you set up with the HRA that fits your needs.

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